IS MEXICO AMERICA’S NEXT
By Antonio Cano, SIOR
In what could be perceived as an overnight phenomenon, Mexico has established itself as a real automotive hub for years to come. But don’t be misled; it has taken
several years and many struggles, including a social and
Key elements that have influenced this process are:
• Mexico has free trade agreements with over 40 countries,
which means that a company exporting from Mexico has
duty-free access to 60 percent of the world’s economic
• Mexico has a $1.26 trillion economy, making it the 15th
largest economy in the world.
• According to a 2014 report from the Boston Consulting
Group, the average cost of labor in Mexico is estimated to be
13 percent lower than China’s.
• Growth was under 2 percent in 2013 and under 3 percent
in 2014. The price of commodities, important for Mexico’s
income from exports, has been falling in what has been
called “the end of the commodity super cycle.”
The result is not too bad: Mexico is the 4th largest exporter and
8th largest vehicle manufacturer in the world. As it continues
to welcome the leading OEM’s (a new KIA assembly plant
started construction this year in the State of Nuevo Leon),
business opportunities will rise, as the supplier base tries to
catch up with the ever-growing demand.
Throughout the country clusters have concentrated mainly on
the states of Aguascalientes, Jalisco, Chihuahua, Queretaro,
Nuevo Leon, and Guanajuato. As expected, the main reasons
behind this are assets such as geographical location, an increase
in domestic purchasing power, lower manufacturing costs,
vast human capital, and an exportation platform to more than
Mexico has some of the most liberal free trade agreements,
and it’s making the most of them. While the U.S. spent over
a decade focusing on the “War on Terror,” Mexico was busy
making deals. Today Mexico has free trade agreements that
make it an export base for automakers from Europe, China,
Japan, and, yes, the U.S.
Asian and European auto makers have already opened
manufacturing plants in Mexico. Japanese Honda Motor
opened a new $800 million plant in Celaya last year to
manufacture the Fit. Korean KIA is making a $2,500 million
investment for its new assembly plant in Nuevo Leon,
operations are scheduled to start in 2018. Other automotive
companies such as, Toyota, Nissan, Ford, General Motors,
and Fiat Chrysler have increased their production in Mexico
recently. From its Aguascalientes plant, Nissan exports to 50
countries. The automaker is cranking out one vehicle every 38
seconds. Meanwhile, Audi is midway through construction of
a $1.3 billion factory that will build luxury SUVs in Mexico
starting in 2016.
Now, to be fair, Mexico is the OECD country with the 2nd
highest degree of economic disparity between rich and poor,
just behind Chile, and 26 percent of GDP comes from the
informal economy, which almost 60 percent of the workforce
With 122 million inhabitants, the GDP per capita stands at about
$10,000, placing it in the “upper middle income” countries.
Adjusted for purchasing power, the GDP per capita is about
60 percent higher, at roughly $16,000. That puts Mexico in the
same level with countries like Turkey, Romania, and Brazil,
although still far below the U.S. ($55,000).
HOW IS 2015 LOOKING SO FAR?
It is estimated that in 2015 Mexico will receive a flow of
Foreign Direct Investment (FDI) of $25.3 billion, a higher
value than the one for 2014.
In the first quarter of 2015, Mexico received 30 percent more
than the FDI amount registered for the same period of last year.
During the last two years, Mexico’s reform activity was the
most dynamic in the OECD. Said reforms, could generate an